PepsiCo offered R110 a share for Pioneer, a premium of about 56 percent, when the deal was announced in July. Photo: AP

Windfall for Zeder shareholders likely

By Sandile Mchunu Oct 9, 2019

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DURBAN – Zeder Investments said on Tuesday that its shareholders could look forward to a windfall if its bid to dispose the 28.6 percent stake it owns in Pioneer Foods gets approval.

The group said that it would reward the shareholders, who approved the transaction handsomely, on the finalisation of the transaction and look for further investment opportunities in the market.

Last month an overwhelming 99.65 percent of Zeder shareholders voted in favour of the deal that would have US multinational food, snack, and beverage giant PepsiCo forking out nearly R6.4 billion for Zeder's stake in Pioneer Foods.

PepsiCo offered R110 a share for Pioneer, a premium of about 56 percent, when the deal was announced in July.

Zeder chief executive Norman Celliers said that Zeder would now proceed to vote in favour of this transaction at a general meeting of Pioneer Foods shareholders, which is scheduled for next week.

“We considered the offer as an attractive price at the time, as it represented a 56 percent premium,” Celliers said.

“We are planning to distribute between R4.25 billion and R4.75bn to our shareholders and invest the remainder of the net proceeds into its existing portfolio or new opportunities.”

Celliers said that the anticipated cash proceeds would flow towards the middle of February or March next year.

He said the final implementation of the transaction, however, remained subject to further terms and conditions.

Zeder’s Pioneer Foods stake is its largest investment, representing 51.2 percent of the portfolio.

Zeder also has exposure to companies such as Capespan, Zaad, Kaap Agri, Agrivision Africa and Quantum Foods.

Zeder reported an 11 percent increase in its sum-of-the-parts (SOTP) a share to R6.25 in the six months to end August, while recurring headline earnings per share decreased 63 percent to 3.6 cents on the weaker performance of most of its investments, following continued challenging trading conditions experienced by the agri, food and related business sector.

Zeder uses SOTP value and recurring headline earnings per share benchmarks to provide management and investors with a transparent way of evaluating Zeder’s performance.

“From an earnings perspective it should be noted that the interim reporting period traditionally represents the lesser half of Zeder and its portfolio’s annual earnings,” Celliers said. “This period reflects the annual input-cost cycle associated with many of its agriculture investments as well as the softer half of the annual trade sales and spending cycles associated with its other investments.”

Celliers said the company was confident that the depressed trading conditions were likely to improve in the longer term.

“As a result, earnings and valuations at both a Zeder and portfolio level are expected to be subdued during the next reporting period,” he said.

He added that despite these challenges and particularly in light of the anticipated Pioneer Foods disposal, Zeder should be in an improved position to create value for its shareholders through this cycle.

Zeder shares declined 0.44 percent on the JSE on Tuesday to close at R4.55.